CA Final · Advanced Auditing, Assurance and Professional Ethics · Internal Audit
Nirmaan Infra Ltd is a listed company whose Audit Committee has five directors, three of them independent. A whistle-blower employee alleges that the internal audit head has suppressed findings against the CFO. The employee wants to report directly to the Audit Committee chairperson. Under Section 177, which conclusion is most appropriate?
The employee may go directly to the Audit Committee chairperson. A listed company's vigil mechanism covers directors and employees, must safeguard against victimisation, and must provide direct access to the chairperson in appropriate or exceptional cases, such as allegations touching the CFO and internal audit head.
- AThe vigil mechanism must route every complaint through the CFO first to ensure fairness
- BDirect access to the Audit Committee chairperson is available only to directors, not employees
- CDirect access to the chairperson is allowed only after the statutory auditor certifies the complaint
- DThe vigil mechanism must provide safeguards against victimisation and allow direct access to the Audit Committee chairperson in appropriate or exceptional cases, so the complaint can go directly to the chairpersonCorrect
Explanation
A listed company must establish a vigil mechanism for directors and employees under Section 177(9). Section 177(10) requires adequate safeguards against victimisation and provision for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases. Here the allegation involves the CFO and the internal audit head, which is such a case. Routing through the CFO would defeat the purpose.
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